Operating Leases

6 Months Ended

Dec. 31, 2021

Operating Leases

8. Operating Leases

8. Operating Leases

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single lease component. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.

The Company determined that the operating lease right-of-use asset was fully impaired on December 31, 2019. As such, the Company recognized an impairment loss of approximately $643,000, after recording amortization of the right-of-use asset for July, August, and September 2019 totaling approximately $27,000, resulting in a carrying value of $0 since December 31, 2019. The Company vacated the leased office space in December 2019, and in January 2020 the Company initiated a lawsuit against the lessor relating to an automatic extension of the lease for the office space and related matters (See Note 9. Commitments and Contingencies).

The components of lease expense and supplemental cash flow information related to leases for the year are as follows:

	Six Months Ended December 31, 2021
Lease Cost
Operating lease cost (included in general and administrative in the Company’s condensed consolidated statement of operations)	$	33,000
Variable lease cost		6,000
	$	39,000
Other Information
Cash paid for amounts included in the measurement of lease liabilities for the six months ended December 31, 2021	$	79,000
Weighted average remaining lease term – operating leases (in years)		3.00
Average discount rate – operating leases		18	%

The supplemental balance sheet information related to leases for the period is as follows:

	At December 31, 2021
Operating leases
Short-term operating lease liabilities	$	180,000
Long-term operating lease liabilities		158,000
Total operating lease liabilities	$	338,000

The following table provides maturities of the Company’s lease liabilities at December 31, 2021 as follows:

	Operating Leases
Fiscal Year Ending June 30,
2022		112,000
2023		223,000
2024 (remaining 3 months)		56,000
Total lease payments		391,000
Less: Imputed interest/present value discount		(53,000	)
Present value of lease liabilities	$	338,000

Operating lease cost for the three months and the six months ended December 31, 2021 was approximately $16,000 and $33,000. Operating lease cost for the three months and the six months ended December 31, 2020 was approximately $22,000 and $46,000, respectively.